The SRA has launched a Consumer Protection Review following an increase in the number of interventions and the catastrophic failure of Axiom Ince. One of the options canvassed in the supporting discussion paper is to phase out the compensation fund and limit the safety net to insurance.
However, by stating that ‘[firms] can choose to insure against fraud/dishonesty by their staff or other directors, but that insurance can only cover those who were not involved in the fraud’, the paper appears to misstate the position under the compulsory Minimum Terms and Conditions of Insurance, which require such cover (up to the prescribed minimum limit of £2m/£3m).
The scope of the Legal Services Board review of regulatory events leading up to the SRA’s intervention into Axiom Ince has been published but notably with little publicity. Given the large number of SRA fines triggered by desktop reviews of firms’ AML compliance, and in particular their PWRA and PCPs, it is to be hoped that the review will examine why as a minimum such a review was not undertaken when Axiom DWFM, essentially a high street firm, announced that it was taking over the international practice of Ince which had many areas of practice, such as shipping (the risks of which were apparent to the SRA from the case referred to above, even if it did not give rise to breaches at Ince), with which Axiom DWFM must have been wholly unfamiliar.
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